dani: welcome to "daybreak: europe", i'm kriti gupta in london. let's get to the top stories. the threat of u.s. government shutdown looms as moody's lowers the outlook, citing political polarization. meanwhile, the white house is resuming military talks are a priority ahead of wednesday's meeting between president biden and xi. boeing versus airbus, the two rivals of the plane making world readying major orders in dubai. we are live at the airshow. a lot of crosscurrents. geopolitics, the bond market, monetary policy and corporate deals in the works. that means net-net a little risk off sentiment. across futures trading, when you look at u.s. futures trading you are seeing a pullback, specifically in european trade. nasdaq 100 futures outperforming, down zero .5%. what's interesting is we are

going back to that dynamic where european and asian investors aren't betting into the american market. over the weekend, we did get that warning coming out of moody's. i would not marry the market moves to what you are seeing out of moody's just yet, although a 0.5% decline is notable. the market tends to panic the day before the actual shutdown is in play. a lot of markets are attuned to this long saga around budgets going into that shutdown deadline. therefore, i would take a second before associating the two, nevertheless you are seeing positivity when it comes to euro stoxx 50 futures, higher 0.2%, that is a function of corporate news we will get. before we do, let's go into the cross assets story because we are looking at the bond market, specifically, when we talk about the treasury market. 5.05 on the two-year yield, do we see some resurgence to this higher for longer idea? that's why you are seeing both 30-year yield come in higher,

while the two-year yelled as we straddle whether these deficit conversations will result in change in fed policy, does that start to mean that an even higher two-year yield isn't necessarily a foregone conclusion? 4.77 when you go to the 30-year, higher by two basis points this morning. that will affect the dollar, which is stuck between a rock and hard place one of his biggest contributors is the euro 1.0685 is your number. brent crude in line with sentiment, trading with an $80 handle. i want to get to top stories around the world. avril hong joins from singapore. and guy johnson on the ground in dubai. avril, how are those asian markets faring? >> kriti, it's a mixed bag among

asian stocks today. the benchmark msci asia-pacific is flat, erasing gains of 0.5% earlier. as the session progressed, it seems investors are turning cautious because this is a week of uncertainties because of the bite and and xi meeting, but also as we await chinese retail sales data in the middle of the week. a week after the cpi number showing us that deflationary pressures in china are deepening. amid all this, we have investors trying to digest of the single'' day event. we had alibaba and jd.com saying sales rose, but bloomberg intelligence has we saw steep discounts being offered. this would put pressure on the margins of these e-commerce giant. we will have to wait and see from their earnings releases later on in the week for strength, or any clues of the chinese consumer from the last

quarter. we are keeping a close watch on the japanese currency, it extended losses to 151.70 five against of the greenback, the weakest level against usd this year, a move up 0.2%. this is important to note because it is not just the levels we're watching, but the volatility, as we keep an eye on what would cause the japanese authorities to intervene at this point. kriti: all eyes on the boj, where they are getting the influence from, is that the government story in the united states? like i said, the story seems to be at the core of what could move a lot of markets this week, is the united states facing the risk of government shutdown at the end of this week. in spite of a compromise plan by speaker johnson weaving out hard-line conservative priorities. the downgrade by moody's on friday lowered its outlook.

they specifically pointed out the following. they said continued political polarization within u.s. congress raises the risk that successive governments will not be able to reach consensus on a fiscal plan to slow the decline in debt affordability. the key word being political polarization. let's bring in jill disis for more, so much to digest the last 48 hours coming out of washington. let's start with the shutdown and the stopgap bill. >> at this point, if the party for speaker johnson is just to get something in the works here, that maybe just delays actually a finalized plan. maybe that's what's in the stopgap bill, it omits spending for israel and ukraine. it doesn't include some of the really deep cuts that ultraconservatives are looking for. it doesn't include that 30% cut

immediately to spending. it would extend funding for government agencies. some through parts of january. a fee more through the beginning of february. ultimately, the idea is creating some kind of stopgap funding bill that at the very least can get through a democrat-controlled senate. what he really only got about a week to go before you hit this next shutdown deadline. we will have to see whether that stopgap bill makes it through. kriti: it feels like in the definition of a stopgap bill, the odds of getting this down the road are still pretty high. if we get some sort of agreement by the end of this week, what comes next? >> it's there in the name, right, stopgap bill. you've got this talk of funding government agencies through parts of january and february, and we are pretty much

in the same position we were not too long ago, where we are still having this debate about the future. the problem is that the more we get into the beginning of 2024, now you are talking about getting into a presidential election year. to moody's point and the concerns about the fiscal position for the u.s. and what that government stability idea looks like, you are probably creating more problems when you talk about this in an even more polarized environment when you have presidential candidates gearing up for next november. kriti: i love that you brought that up, because you have the shutdown conversation. we are showing a chart of one year cds's, but cost to insure against some sort of government default, if it does, there would be bigger issues on our plate. this is getting price into the market here. you mentioned that timeline going into the election. my favorite fun fact is the next time the deficit and raising the debt ceiling conversation comes

up, you are looking at january 2025, a.k.a. month one of the brand new president, if indeed we get one. jill disis bringing us that reporting this morning. in addition to all the government talk in the u.s., president joe biden and chinese president xi jinping meet on wednesday on the sidelines of the apec summit in san francisco. the 21-member forum marks the first time the u.s. hosted the event in 12 years. it will be the first face-to-face conversation in a year between the leaders of the world's two largest economies. xi is a guest of honor at a dinner hosted by u.s. business groups including top executives of fortune 500 companies. in dubai, the air show off today with several major deals worth tens of billions of dollars set to be quote in the wings. both boeing and emirates are poised to unveil significant orders, and china may end a freeze on 737 max sales when

biting and xi meet on wednesday. guy johnson joins us live from the airshow in dubai. walk us through how big of a deal day one is. guy: it could be the biggest day at an airshow in 10 years. that's significant. most of these orders will be wide-body jets as well, so the numbers could be quite substantial. potentially north of $100 billion worth of orders on day one. the first-order to kick things off is about to happen, we think tim clark at emirates is about to place a substantial order for boeing 777's in the next few minutes. he is the biggest customer for that program. it is a huge vote of confidence. those aircraft will replace his aging a380's. it's not going to stop there. we are expecting deals today with turkish airlines, airbus could land a significant order there. the vote of confidence these airlines are giving both boeing

and airbus at the moment is substantial. they are signaling that they expect huge demand going forward from here. they want to secure their slots. they feel now is the moment to do it. there is a frenzy of ordering. it was the narrowbody's post-pandemic, it looks like we are moving into the wide-body section of the market right now. these are big orders. just warming up here in dubai. kriti: guy, take a massive step back and zoom out. we are talking the macro perspective of geopolitics which for a while were reflected in the orders of boeing, airbus and bombarded here, and economic questions when it comes to consumer demand, etc., do you want to be investing in big orders one perhaps consumer demand is on the decline? guy: let's break it down into its component parts. geopolitics. let's start there. you have a major war in this

region, huge amounts of instability. it's fascinating to see big carriers like emirates and turkish placing substantial orders. they clearly don't think this geopolitics will have a big impact in terms of the demand they will see. then you come to the economics. as you say, we are seeing evidence of an economic slowdown . take a look at the latest survey from the conference report. it asks participants whether or not they intend to travel long haul over the next six months, and a huge number of them do read while we are seeing economic slowdown reflected in some of the discretionary brands , think what richemont had to say the last few days and diageo, the aviation industry clearly thinks at this point it is not going to be affected by that. we will continue with his huge post-pandemic room. then there is the industrial question as well. this is significant too, both airbus and boeing are struggling to build all the planes they have got at the moment -- the orders at the moment.

they are still seeing substantial supply-chain issues. maybe that's part of the conversation here. because maybe the airlines are simply looking at the potential order books, they are worded they will reach capacity in their ability to build the airplanes, therefore they will secure the slots. the moment, despite what we are seeing elsewhere in the world, the geopolitics, the economic and industrial questions, the aviation industry continues to boom. the question is, does that get sustained? at the moment, the messages yes, yes, but these are huge headwinds we are facing right now. kriti: they are massive read as you point out, not only are they huge headwinds, there could be huge tailwinds, pun not intended for the stock market. boeing and airbus both massive components for the equity indices. guy johnson reporting this morning. he will have plenty more interviews from the dubai airshow, including with the

riyadh air ceo at 7:30 a.m., as well as the emiratis president. you can get a full round up the stories you need to get your day going in today's edition of daybreak terminal. the top story will be on these major deals. these will have global repercussions for geopolitics. subscribers be sure to tune in. coming up, talks intensifying over a deal to release hostages held in gaza. the latest from the middle east coming up next. this is bloomberg. ♪

>> is there a potential deal? >> there could be, but the less i say, the more i will increase the chances it materializes.

if the result of military pressure. --it's the result of military pressure. >> we are in front of a humanitarian disaster. i call on the international community to an end to israel's brutal violations of humanitarian law. kriti: senior officials in israel and the united states suggest talks are intensifying around securing the release of hamas-held hostages. president biden spoke with qatar's leader about efforts to secure additional releases. sylvia, a pleasure to have you on. walk us through these efforts and the details around these hostages. >> qatar has already been involved in helping to free some of the hostages held by hamas in gaza. he has been mediating between hamas, israel and foreign countries, but those efforts

have stalled. now there are real efforts to free the others that are held. it is believed more than 200 hostages are being held in the gaza strip. that's part of diplomatic efforts to do that. israel says it won't contemplate any kind of ceasefire with hamas until hostages are freed. kriti: at the same time, we have arab leaders meeting over the weekend. have they come to any sort of consensus? >> what we saw over the weekend was that arab nations have condemned airstrikes on gaza. they have called for efforts to prevent civilians. they have rejected israel's position that it is acting in self-defense. but we haven't seen that they have taken any economic or political steps in retaliation. it's mainly been words so far. this reflects a division within the region, because some countries do have diplomatic relations with israel. some of them are working towards

that. that's where we are so far. it's important, even though no steps have been taken, that the view of the region is taking into account because any future for a postwar gaza will need regional buy-in, and these countries need to balance their public opinion which is strongly against israel, with what could happen in the future and how their countries are managing this difficult situation diplomatically, politically, economically and in terms of security. kriti: certainly a dire situation that a lot of people were hoping there would be some sort of solution to, it doesn't seem like that is on the horizon anytime soon. sylvia, thank you for that update. it has global repercussions even in europe, in the u.k., police arresting thousands of far right counter protesters seeking to disrupt a pro-palestinian march in london over the weekend. the event coincided with armistice day that remembers the country's losses from war.

the pro-palestinian march was the biggest in the city since the conflict has began. it put a spotlight on rishi sunak's government after his home secretary called for last weekend's protest to be banned. 100,000 marched in paris on sunday against antisemitism. we will walk you through the global ramifications for markets as well. stick with us. this is bloomberg. ♪ good night! hey corporate types. would you stop calling each other rock stars?

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>> we basically solve the unwinding of six weeks of underperformance in one week. it shows a lot of people the risks of being out of this market. >> caches outperforming the last two years, there is no need to take a major bet. >> very large stocks are not as expensive, that would certainly be a portion of where i would put my money.

>> our highest conviction trade for those looking for opportunistic investments is to go long-duration treasuries. >> nobody has any idea what the bond market will do, we are in this sit and wait and to be convinced, because that is what leads to the ability to chase a rally. >> the fed is pulling back, the economy will slow, but we will be discounting the fed cuts that are coming, that's the bullish case for 2024. people will start buying into that, or at least trimming negative bets as we get closer to the end of the year. kriti: the fed pivot seems to be the bull case for markets. the guests sharing their contrary and trades for 2024, worries about economic downturn are not enough to sway participants from being bullish, with risky debt being their trade for 2024. the core of it will be this

issue that that is the macro story, you are pulling forward a lot of expectations that the federal reserve and others. as opposed to the resilience and the fundamentals. resilience that you are seeing in the earnings front, which is where i want to go next, specifically with south african mobile network operator vodacom. sales are up more than a third. our reporter joins me from kigali. walk us through the currency impact first inform arst -- foremost in terms of vodacom's performance. >> click currency impact has not been as much as another telcos across the continent. vodacom in comparison to peers such as airtel, which reported a

loss of $471 million attributed to foreign exchange. ntn, on the other hand, recognize that there are unrealized foreign-exchange losses they will have to account for in the long run. the problems of ntn do not stop there, they are having a tax dispute with the tribunal in nigeria, and were ordered to pay $47.8 billion in tax disputes, and this led to shares falling. we saw vodacom shares surpass ntn or ben the first time. kriti: when you talk about that growth at their bottom line, a lot of it is driven by that deal with vodafone. talk to us about the other deals vodacom is doing across the continent. >> they are pursuing a fine margin with their fiber business , however the south african antitrust regulator is not happy

with this deal because they say it will give vodacom too much power. this is something that has been disputed, and we wait to see what results come from it. there is some major deals vodacom has been pursuing across the continent in kenya. this deal comes with challenges. the currency has lost 20% of its value to the dollar. this market is grappling with rising taxes and has challenges with energy costs and a general cash crunch. when the deal is completed, there is also worry that investors will not be able to extract their dollars once business is completed, or at the end of every year. in egypt, where business is doing great, however there are concerns of the egyptian pound being devalued, after it was devalued earlier in the year. kriti: certainly something we are keeping a close eye on.

really interesting to see how the telecoms space perhaps in europe and the united states pulling back reduce all those in earnings last week, and africa really growing substantially. we thank you so much for your reporting this morning. i want to bring you other news from around the world, starting in australia, where shipping operations are slowly resuming after cyberattacks paralyzed four port since friday. leaving tens of thousands of containers stranded. the port operator which manages 40% of goods flowing in and out of australia said the service will not return to normal for another week. the disruption comes amid a strike by workers. speaking of cyber situations, cyber catastrophe bonds may be about to move out of the shadows of private dealmaking and into the public debt markets. so-called cat bonds have typically been built around natural disasters such as hurricanes, but as cyberattacks

become too big to ensure, issuers are seizing the moment. they are cater to things like this, icelandic bracing for its most devastating volcanic eruption in 50 years, with a small fishing village at risk of being destroyed. authorities evacuated a southwestern town about 40 kilometers from the capital. when a different volcano erupted in 2010, 100,000 flights were affected affecting -- were canceled affecting more than 10 million people. military talks economic ties are the presidents' priorities when they meet in san francisco this week. stick with us. this is bloomberg. ♪ you want to be able to provide your child with the tools or resources they need. with reliable internet at home, through the internet essentials program, the world opened up. fellas, fellas. that's how my son was able to find the hidden genius project. we wanted to give y'all the necessary skills to compete with the future. kevin's now part of this next generation

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to "daybreak: europe." the threat of u.s. government shutdown looms large as moody's lowers the countries outlook citing political polarization. the white house says they are resuming military talks i had of a priority wednesday meeting between president biden and president xi. and boeing versus airbus, they are said to be readying major orders in dubai. we are live at the airshow. lots of deals in the works, lots of geopolitics as well. that's get a check on how it translates to the markets. original divergence in futures right now. be careful what market narrative you associate with. on the surface you are seeing green on the screen. a lot of that will be coming from some of the corporate news we are getting. the dubai airshow will be positive, at least net-net for

these major deals and european indices good -- indices. s&p and nasdaq underperforming. the gut instinct is to say this is about moody's morning when it comes about -- it comes to the government shutdown. let me warn you about that because the markets tend to panic the day before the government shutdown, not this early. there is still some hope. european traders just aren't bidding for american trading. some stagnancy in the bond market. 30 year about 476. -- 4.76. we will bring you a little more analysis and the rest of the show. euro-dollar the biggest contributor to the bloomberg dollar index, just shy of 1.07.

when we get past the u.s. shutdown conversation we will probably talk about parity. i want to get to one of our top stories, president joe biden and chinese president xi jinping expected to meet on the sidelines of the apec summit in san francisco. it will be the first face-to-face conversation in a year between the leaders of the world's two biggest economies. for more, let's bring in rebecca. want to be watch out for? this is a pretty historical moment. rebecca: i think the key thing will be how sustainable any of the agreements they have. we've seen improvements in communication over economic topics, and the resumption of military talks are important, they had ground to a halt after

nancy pelosi visited taiwan in 2022. since then, that kind of communication had really fallen short. there is a brief window, particularly from beijing's point of view as a brief opportunity before u.s. elections kickoff and elections in taiwan kickoff, to try to normalize the relationship and figure out how to keep those channels of communication open. the other element is after all the preparations, biden is likely to want to walk away with a concrete win. they could come to an agreement on ai, climate and possibly sentinel, and -- and possibly sentinel -- fentanyl. kriti: it feels like the fact that you are talking about some of the military conversations around the world, aid to ukraine

and israel and potentially taiwan as well. it feels like the focus will shift to that. what we know about what might be on the table? rebecca: i think essentially the first sort of big thing will be making sure lines of communication are open at all. last year all it took was an alleged spy balloon that china flew over the continental u.s. to see the full breakdown in communication, with reports then that xi jinping refused to take calls from the white house. ensuring you have the lines of communication open at the highest levels in addition to some of the more lower level discussions we've seen starting to emerge just in the weeks before this meeting is really critical. when you think about this increase in competition with philippines and china. there is a risk of a flashpoint increasing, making it all the more important that some kind of

communication is core to centralizing now at this point in the relationship. kriti: rebecca, thank you for bringing us that reporting. we will monitor it through the week. meanwhile, from asia and the united states to right here in europe, tens of thousands of people gathered in central madrid and other major spanish cities to protest against the acting prime minister's plans to grant amnesty to catalan separatists. more than 270,000 people took to the streets. maria tadeo is joining us from brussels. you have a long history of covering this. walk us through the back ground of these protests. maria: good morning. a big protest on this sunday and not just in madrid. in madrid it is normal to see big political protests. the capital of the country, it concentrates a lot of the

political debate but you see protests played out across the country which again shows this issue of political amnesty that cuts across the entire country. what are the protests about? two factors are important to remember. one is last week there was a political deal that has been cut between the spanish socialist party and catalan nationalists, some of which are separatists, some of whom carried out an illegal referendum and then declared independence, very briefly but they did it. now there is a criminal situation still pending over some of these people. the amnesty, which essentially is a political party in, it would cancel criminal charges and essentially seeks to move past the constitutional crisis. the issue was always going to be divisive, corrosive, some say it is toxic in the country and

leads to pushback. some say the prime minister is only doing this because he needs the votes to get back into office. it is a very tense situation. all of this is happening days before we expect the caretaker prime minister will go into a vote of confidence. kriti: two-year vote -- to your point, this is the third or fourth time he tried to form a more sustainable government. to what extent does this derail his plans? maria: it's not a sustainable government in any way, the government he's trying to form depend on nationalist forces, the issue with the government like that, defective fundamentally, and nationalist party means they get concessions or need an element of constant attention with the central

government. no matter what happens this week it will be a difficult government for the spanish socialist government. we should also remember the spanish conservatives have a majority in the senate, the second chamber in the country. will this derail anything in terms of the protests? i think at this point the government has made a political calculus very risky bet. they believe the issue of amnesty is considered a sign of desperation for the government because they need those votes to take office but they believe in the medium-term it will disappear. it is a risk it is worth taking and will facilitate a second term for pedro sanchez. the issue however is he is stepping in at a time in which his government from the outside looks like it's going to be pulled from many different sides. the longevity of the government is something i really wonder about. kriti: it's something we know

you will monitor very closely. maria, thank you for your reporting this morning. we go to dubai, the air show kicks off with major deals for tens of billions of dollars. boeing and airbus poised to unveil significant orders. let's bring in guy johnson live on the ground. egypt, turkey, even china. major orders in the works. what is your take about what this means in the face of some of the economic and geopolitical hurdles that kind of brooch the market trade right now? guy: there are so many headwinds facing this industry at the moment yet we continue to see these massive orders coming through. you got geopolitical issues, look where i am standing right now, we are surrounded at the moment. the economic slowdown, you been talking about what is happening in d.c. look at the data, most of it points to an economic slowdown.

you've got industrial issues surrounding the industry as well. at the moment, particularly the long-hauler market, slow down in the short-haul market, but in long-haul there is still huge amounts of demand and that's what we see orders being placed. we've got major oems with supply constraints. slots are limited, if you want these airplanes, you've got to come now in place the orders. all kind of factors coming together at the moment. you would have thought all of these issues would be affecting the orders but they are not. at the moment demand is holding up, the moment, the industry is supply constrained, and as a result you are still seeing a huge order frenzy swirling around this show. we didn't expect it would be this big even a few days ago. we've been surprised by the scale of the orders we are expecting to see but this is an

industry that is voting with its wallet and will spend money significantly. do all of these orders come through? let's wait and see, the headwinds are significant. kriti: the question of do the orders come through, talk about the backlogs. is the backlog a function of the orders or are the orders a function of the worries around the backlog? guy: it is a bit circular, isn't it? i think it's a bit of both. airbus and boeing supply constraints, they can't build enough airplanes at the moment to satisfy demand. they are a little more cautious in the white bodies, the bigger, more expensive planes. the workhorse of this world is the 737 max. that demand is more stable. more volatile at the long-haul part of the market, but that's where we see demand switching to. a lot of people want to travel

long-haul. at the moment there is huge demand. will these orders ultimately be executed? let's wait and see, they will be placed over many years. then you've got the issue of china as well. you've been talking about the apec summit coming up for boeing, this is a huge we. we are about to see massive orders coming through. stan deal, who we will talk to shortly, will be jetting to san francisco because china is huge at the moment but boeing is largely locked out. will we see extra orders coming through from the aipac meeting between xi and biden? will we see deliveries of boeing aircraft for china? it will create more demand in an industry already heavily supply constrained. kriti: worth mentioning that china notably after the crashes,

the 737 max, it was the last to lift the ban on that. next hour, guy will be speaking to tony douglas. you don't want to miss that interview and an hour later, the emirates president. market moving interviews you don't want to miss right here on bloomberg television. coming out, or the 90% of european companies already having reported their third quarter earnings scorecard, we have more from bloomberg intelligence. this is bloomberg. ♪

kriti: companies representing

about 95% of european market cap have reported results, as they wrap up third quarter earnings season. let's get around up with tim craig, joining me bright and early. i think we have this conversation about a month ago and you said things were not looking good. are they still going poorly? tim: bottom line, yes. [laughter] in a word. we are now roughly 94%, 95% through earnings if you look at it on a market cap basis. this is proving to be the worst earnings period in europe since the pandemic. headline numbers, almost 50% of the companies have beat about 40% -- have beat, about 40% have missed. that might sound ok, but this is more like 60/30 or even 70/20.

the u.s. has had decent earnings period, so all that comes together and we are running at about 12% down year-over-year on earnings. about 3% of a decline but still a notable start of an earnings recession. kriti: in terms of sales let's talk about bottom line growth. margins specifically. as we covered so many earnings breaking on the show, operating profits can seem consistently higher but is that quarter by quarter or just low cop from last year? -- low comps from last year? tim: not low comes from last year, we are operating on numerous record profit margins. one of the things we've been most concerned about in this earnings period is that we would see market erosion search to kick in. that's not been the case. sales have missed a bit, margins

have been a bit better than expected. that's an issue where companies come on the positive are taking proactive measures to try to do for the restructuring and cost mitigation. there have been more headcount cuts across the european market in the month of october than we had in the prior three quarters on a running basis. companies are getting more aggressive on that front. kriti: on one hand we are talking about cost and even market erosion but then we also have seen buyback announcements as well. is there a logic to that or are those idiosyncratic stories? tim: i think there is a bit of the latter. party analysis, we think about in terms of the free cash flow generated, how much is going to buybacks, how much to dividends?

companies are still focused on shareholder returns. if they can put that money to work from that perspective, that is ok. the question then is, how much of it is going back to shareholders versus investors for growth? there are some stories with concern. kriti: the idea to keep an investor interested in this market from an equity standpoint you have to offer them a sweetener for the deal. talk about the regional divergence. intuitively it feels like if inflation is an issue globally, the u.s. and european earnings would show similar things and we are not showing -- we are not seeing that. why? tim: a big part is the composition of the markets. the u.s. had an earnings recession through late last year through the first half of this year and they have shown earnings growth for the first time in several quarters, but it is big tech and big tech went

through an earnings recession late last year and pulled the s&p 500 down. here we are looking at a broader swath of the market. granted i said before the energy business is a big deal and if you back that outcome of the earnings decline is not nearly as significant, but still, 3% down this quarter. our expectation if you look at consensus and our models is you could have something worse in the fourth quarter before we start to see a european increase in 2024 progressively. kriti: it's interesting the lags from the global economy versus the united states which i feel like is setting the earnings tone in a lot of ways, specifically the banking sector. a conversation for another time. thank you for your analysis. i want to get other news in the corporate space, starting with no vote nordisk.

they have announced a blockbuster drug for weight loss. those taking the highest dose saw a drop of the two signs of heart disease good the first human study has found an eli lilly drug cut heart risk factors for almost a year. it reduced to form of cardiovascular disease linked to clogged arteries and is raising hopes that in any will vaccine could lower the risk of the world leading cause of death. from biotech we go broader. several investment banks reportedly have approached it reese treasury's offers to help sell part of its stake in an energy company. the italian government could reduce its holding without losing full control. plenty more to come, stick with us. this is bloomberg. ♪

kriti: there is a lot to digest over the weekend but i want to get to i think our top story, what is going on in the united states, the idea that a fiscal deficit is prompting moody's to say we will push the united states on watch. it's crucial woman talk about the potential for government shutdown. at the core of its thesis you saw them say that political polarization is where the worry lines. also the issue not around just shutdowns but the deficit bill as well. these issues continue to create stopgap funding measures and put a lot of pressure on not just fed policy but the bond market, and now the one your credit default swaps. essentially the cost to insure against a u.s. default. if the united states defaults there will be massive repercussions. the credit default swap market is not that liquid but it speaks to the sentiment you are seeing.

on the right-hand corner you are seeing a spike. what is important is if you look at how high they have been, not as high as the deficit issues in may, but significant. that will be significant further and further into the week. the other bigger story is how this factors into the federal reserve, the fed had said the selloff on the long end of the curve is a function of the worries around a fiscal deficit, as opposed to expectations from the federal reserve. they also have to worry about this. long-term inflation expectations. in the short term, this idea simply being that fed policy might be pricing in a cut or whatever, but long-term, inflation expectations are significantly higher. yields on the 30 year still rise in on the front end of the curve. you are seeing them come down a bit as a result of fed swaps.

this is a tort to keep an eye on, because -- this is a ch art to keep an eye on. do we get a deal before the government shutdown? we will have full coverage on bloomberg television, as we will have of the dubai air show. amazing guess you don't want to miss. tony douglass at 7:30 a.m. london time, guy johnson on the scene in dubai ringing us that interview. all on markets today next. this is bloomberg. ♪

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>> this is "bloomberg markets: today." i am anna